Public Bill Committee

[Dame Angela Eagle in the Chair]

Angela Eagle: I have a few preliminary points. Please switch off electronic devices or turn them to silent. Hansard Reporters would be very grateful if Members emailed them their speaking notes.

Clause 1 - Definition of “paper trade document”

Question proposed, That the clause stand part of the Bill.

Paul Scully: It is a pleasure to serve under your chairmanship, Dame Angela. Clause 1 defines the type of trade documents that may fall within the scope of the Bill. It does so by setting out the criteria that the documents must satisfy. The list of documents included is intentionally broad to ensure that when the trade market uses a document in such a way that possession of it is significant—even if that is a matter of commercial practice, rather than law—it can be confident that it is regarded as being possible to possess it.

Patrick Grady: I am keen to welcome the provisions giving legal recognition to electronic trade documents. It is clear from all the evidence and research behind the Bill that digitalisation of the documents listed in the clause will help to speed up transactions and lead to significant cost savings and efficiencies. The Government claim that they are ahead of other G7 countries in introducing these changes, but I wonder whether this does not all still smack a bit of yesterday’s technology solving today’s problems tomorrow, rather than tomorrow’s technology solving those problems today. With the rise of artificial intelligence, I wonder how soon some of the processes that we are talking about will be conducted with very little human interaction.
The clause provides the foundation for the rest of the Bill by setting out the definition of “paper trade document” and all that follows from that. The Scottish Government had some concerns about the Bill, but I will come on to those a little later.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2 - Definition of “electronic trade document”

Question proposed, That the clause stand part of the Bill.

Paul Scully: The clause defines the criteria that a trade document in electronic form will need to meet to fall within the scope of the Bill, and therefore to be legally equivalent to a paper document.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Clause 3 - Possession, indorsement and effect of electronic trade documents

Question proposed, That the clause stand part of the Bill.

Paul Scully: This clause provides that a person may possess, and part with possession of, an electronic trade document. It removes the legal blocker that prevents trade documents in electronic form from being possessed, and therefore from having the same legal status as paper trade documents. The clause is fundamental to ensuring that there is equivalence between the two, which is needed if we are to meet our policy aims.

Alex Davies-Jones: I rise briefly to endorse what the Minister says about the Bill. It is incredibly important, particularly post Brexit, when red tape has significant consequences for our ability to trade with the rest of the world. We welcome the Bill.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Clause 4 - Change of form

Question proposed, That the clause stand part of the Bill.

Paul Scully: The clause provides the change of medium or form of a trade document—that is, it allows for the conversion of a paper trade document to an electronic one, or vice versa.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 5 - Exceptions

Paul Scully: I beg to move amendment 1, in clause5,page3,line24,leave out “Secretary of State” and insert “appropriate authority”.
This amendment provides for regulations under clause 5(2)(b) to be made by the appropriate authority. The appropriate authority is defined by Amendment 4.

Angela Eagle: With this it will be convenient to discuss the following:
Government amendments 2 to 5.

Government new clause 1—Regulations under section 5.

Paul Scully: Clause 5 contains an opt-out provision that allows industry participants to design their documents so that they are not caught by the Bill and are not possessable if they prefer to do business using other contractual arrangements or legal mechanisms. An express opt-out provision is not required and it will be enough if it can reasonably be inferred that it is not the intention that possession should apply. We have drafted the provision carefully to be limited to documents used in trade to  which possession is relevant, allowing an opt-out where it is clear from the document or practices around its use that possession is irrelevant.
The Bill includes a delegated power in clause 5(2)(b) that will enable the Secretary of State to specify further types of documents or instruments that are outside the scope of its substantive provisions, in addition to uncertificated securities already cited in clause 5(2)(a). There is a further delegated power in clause 5(3) that enables the Secretary of State to amend or remove the exception in clause 5(2)(a). In acknowledgement of the Bill’s potential to spur further digitalisation of documents and related practises, the power may need to be exercised in circumstances where it is determined that a type of document or instrument that falls within the scope of the Bill requires more bespoke provisions to allow for its digitalisation, or where a type of document or instrument should not be capable of being used in electronic form.
On the amendments, the Government’s intention has always been that the Bill should apply UK-wide, and we have already agreed with our colleagues in Northern Ireland that the Bill does not require their consent, given that it deals with a reserved matter. The Welsh devolution settlement restricts Senedd Cymru from making changes to private property law, and we have agreed that legislative consent is not necessary in this case.
In the case of Scotland, private property law is a devolved matter and we have requested a legislative consent motion from the Scottish Parliament. We have worked with officials, and I know that Scottish Government Ministers have been advised to support that. I hope that we will continue to work to ensure that that happens. We want to consider the matter further and to have belt and braces, so we also consider it prudent to confer the power in clause 5(2)(b) on Scottish Ministers, both to exercise the power alone within areas of devolved competence and to act jointly with the Secretary of State. By including the option for Scottish Ministers to act alone and jointly, the delegated powers can be exercised in a flexible manner that best suits the prevailing need for secondary legislation. Moreover, it prevents any future uncertainty as to whether matters are within the devolved competence of Scottish Ministers, particularly if they cut across devolved and reserved matters.
The requirement in clause 5(4) for the Secretary of State to consult Scottish Ministers before exercising the power in clause 5(2)(b) will be disapplied in circumstances when the Secretary of State and Scottish Ministers act jointly to make regulations. As noted earlier, although the need for amendments to the Bill in the future is unlikely, we believe that such changes are best delivered through concurrent delegated powers that will allow both the Secretary of State and Scottish Ministers to make those changes. The proposed amendments will therefore enable Scottish Ministers to make such regulations when all the provision is within Scottish devolved competence and to act jointly with or be consulted by the Secretary of State in other cases.
The delegated powers previously afforded to the Secretary of State by the Bill are not substantively affected by the amendment, so we have tabled new clause 1 to provide for regulations under clause 5 to be subject to the affirmative resolution procedure at Westminster and in the Scottish Parliament. In addition to those two substantive amendments, we have had to include four consequential amendments to update and correct cross-references.   I hope that colleagues will acknowledge the requirement for amendment 1 to change the appropriate authority, and the consequential amendments that allow that amendment to be inserted into the Bill.

Alex Davies-Jones: I have just a brief question for the Minister. In the Second Reading Committee, I pressed him on where the responsibility for the Bill would sit. I would appreciate it if he would put on the record exactly which Secretary of State will have responsibility for and oversight of the Bill.

Patrick Grady: I echo the point made by the Labour Front Bencher. This is a Law Commission Bill being taken forward by a Minister from the Department for Science, Innovation and Technology on matters largely overseen and regulated by the Department for Business and Trade. A little clarity about exactly which Secretary of State is referred to in these clauses would be helpful.
The Scottish Government welcome the Bill in principle, but the initial legislative consent memorandum set out a number of concerns about the powers granted to UK Ministers to legislate in devolved areas, particularly without the requirement for consent from Scottish Ministers or Scotland’s Parliament. The amendments tabled by the Minister go some way towards addressing that, so the supplementary legislative consent memorandum published by the Scottish Government on 13 June sets out:
“While the amendments proposed by the UK Government do not provide a full statutory consent provision, on balance, the Scottish Government recommends that the Parliament grants legislative consent”.
That is because
“The policy objective of the Bill is strongly supported by both the Scottish Government and stakeholders…there is no current legislative opportunity at Holyrood to make equivalent provision for Scotland, and any such legislation would not be as comprehensive as the UK Bill…the power involved is extremely limited, and unique to this law reform Bill…the aim is to ensure consistency in a mutually agreeable and workable way and that in practice it is highly unlikely for Scottish Ministers to want different arrangements for trade documents to apply in Scotland.”
It is welcome that the Minister has been able to table amendments that will allow Holyrood to agree to the Bill, but I wonder slightly whether this could not have been foreseen. Scottish Government Ministers and, indeed, those of us who represent the SNP in this House, have for several years expressed our concern at increasing overreach by UK Ministers into devolved areas, especially in the context of Brexit. There was quite a lengthy consultation before the Bill was published, so quite why none of this appears to have occurred to Ministers before we got to the Public Bill Committee right at the end of a Bill that started in the House of Lords is slightly beyond me. However, consensus does, for once, appear to have been reached. These amendments will make the Bill much more palatable, so that should ease its remaining stages both here and in Holyrood.

Paul Scully: I am glad that we were able to get there by the end. The Government have undertaken significant legal works, including by engaging independent legal counsel to analyse and ensure the compatibility of the Bill’s provisions with both English and Scots law, including that related to the Moveable Transactions (Scotland)  Bill currently before the Scottish Parliament. I am glad that we got there in the end, ensuring that we talk and agree as best we can. I can confirm that the Secretary of State for the Department for Business and Trade will be exercising this power.

Amendment 1 agreed to.

Angela Eagle: If I perceived correctly, the Minister has already amendments 2 to 5—am I correct?

Paul Scully: I think I have, yes. I got a bit excited there.

Angela Eagle: It is normally helpful if the amendments are moved at the appropriate time. Otherwise, we will get ourselves in a bit of a mess. I recognise the Minister’s enthusiasm, but perhaps we could keep to the selection of amendments; everyone will then be able appropriately to follow what is going on. Given what the Minister said, unless anyone objects, I intend to deem those amendments moved in the previous debate.

Amendments made: 2, in clause5,page3,line29,at end insert—
“(4A) Subsection
(4) does not apply if the regulations are to be made by the Secretary
of State and the Scottish Ministers acting
jointly.”
This amendment provides for the requirement for the Secretary of State to consult the Scottish Ministers before making regulations not to apply where the regulations are to be made jointly by the Secretary of State and the Scottish Ministers.
Amendment 3, in clause5,page3,line31,leave out paragraph (a).
This amendment removes provision that is replaced by the new clause inserted by NC1.
Amendment 4, in clause5,page3,line32,at end insert—
“(5A)
‘The appropriate authority’, in relation to regulations
under subsection (2)(b),
means—
(a) in any case,
the Secretary of State or the Secretary of State and the Scottish
Ministers acting jointly;
(b)
in a case in which all of the provision made by the regulations is
within Scottish devolved competence, the Scottish
Ministers.
(5B) Provision is
within Scottish devolved competence if it is provision which would be
within the legislative competence of the Scottish Parliament if
contained in an Act of that
Parliament.”
This amendment provides for the power to make regulations under clause 5(2)(b) to be exercisable by the Secretary of State, the Secretary of State and the Scottish Ministers acting jointly or (where the regulations only make provision in devolved competence) by the Scottish Ministers acting alone.

Amendment 5, in clause5, page3,line33,leave out subsection (6).—(Paul Scully.)
This amendment removes provision that is replaced by the new clause inserted by NC1.

Clause 5, as amended, ordered to stand part of the Bill.

Clause 6 - Consequential provision

Question proposed, That the clause stand part of the Bill.

Angela Eagle: With this it will be convenient to discuss clause 7 stand part.

Paul Scully: Clause 6 provides for consequential changes to the Bills of Exchange Act 1882 and the Carriage of Goods by Sea Act 1992. Clause 7 sets out the territorial extent of the Bill, the commencement date and the short title.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clause 7 ordered to stand part of the Bill.

New Clause 1 - Regulations under section 5

“(1) Any
power to make regulations under section 5, so far as exercisable by the
Secretary of State acting alone or by the Secretary of State and the
Scottish Ministers acting jointly, is exercisable by statutory
instrument.
(2) For regulations
made under section 5 by the Scottish Ministers acting alone, see
section 27 of the 2010 Act (Scottish statutory
instruments).
(3) A statutory
instrument containing regulations made under section 5 by the Secretary
of State acting alone, or by the Secretary of State and the Scottish
Ministers acting jointly, may not be made unless a draft of the
instrument containing the regulations has been laid before and approved
by a resolution of each House of
Parliament.
(4) Regulations
made under section 5 by the Scottish Ministers acting alone, or by the
Secretary of State and the Scottish Ministers acting jointly, are
subject to the affirmative procedure (see section 29 of the 2010
Act).
(5) Where regulations are
made under section 5 by the Secretary of State and the Scottish
Ministers acting
jointly—
(a) section 29
of the 2010 Act (affirmative procedure) applies in relation to the
regulations as it applies in relation to devolved subordinate
legislation (within the meaning of Part 2 of that Act) which is subject
to the affirmative procedure, but as if references to a Scottish
statutory instrument were to a statutory instrument,
and
(b) section 32 of the 2010
Act (laying) applies in relation to the laying before the Scottish
Parliament of the statutory instrument containing the regulations as it
applies in relation to the laying before that Parliament of a Scottish
statutory instrument (within the meaning of Part 2 of that
Act).
(6) In this section
‘the 2010 Act’ means the Interpretation and Legislative
Reform (Scotland) Act 2010 (asp 10).”—
This new clause provides for regulations under clause 5 to be statutory instruments and to be subject to affirmative resolution procedure at Westminster and in the Scottish Parliament.

Brought up, read the First and Second time, and added to the Bill.

Bill, as amended, to be reported.

Committee rose.